Junk Bonds

In 1998, Mayor Ron Kirk promised voters the city's total cost in the Trinity River project would be $246 million. City lawyers later argued in court--successfully--that he had his fingers crossed.

Peter Calvin

Let's say some guy--we'll call him Derwood the Philosopher, a made-up person--has worked out his own private philosophy, Derwoodology, the bottom line of which is that it's OK for Derwood to go back on his word. He even tells you about it. "Thanks to my philosophy, I can go back on my word, no problem."

Then he asks you to co-sign a loan for $250,000. He puts his hands on your shoulders, stares deep into your eyes and says very solemnly: "My word is my bond."

What would you call a situation like that? I know what I'd call it. A Dallas bond election.

You know how bonds work. City Hall borrows hundreds of millions of dollars for big projects. The taxpayers co-sign the loan. But the taxpayers have to vote in the first place to give their permission.

When a bond election is coming up, like the one next May, the city tells voters what it's for. City officials join the Greater Dallas Chamber of Commerce, the Dallas Citizens Council, The Dallas Morning News and other major players in the community to persuade voters that the borrowed money will be spent wisely on projects the voters will find sensible. Part of the pitch is a detailed description of the projects.

Two years ago a group called Taxpayers for Sensible Priorities sued the city over the Trinity River project--a multibillion-dollar local, state and federal public works campaign to rebuild the river through downtown. The city's share was supposed to be $246 million. TSP argued the city had changed the river project almost beyond recognition, reneging on key promises to voters.

In court the city never denied the project had been turned into something quite different from what voters had been promised in the 1998 bond campaign. Instead the city argued it doesn't make any difference what the mayor promises people; it doesn't make any difference what the city itself promises in city publications with the official city seal on them; it doesn't matter what may be promised by campaign committees made up of elected officials and civic leaders; the only thing that counts is the actual fine print on the ballot on vote day. And that language, the city argued, is typically so vague that it doesn't really hold the city to anything specific.

This is where we get to Derwoodology. And Derwoodology, remember, is a very complicated philosophy that can only be understood by people with a gift for understanding rapid speech.

The city did not argue in court that the city can officially lie. What it argued was that sometimes when the city seems to be speaking officially, it really isn't. There are some steps along the way in here that I'm leaving out, because I can't figure them out. But let's go to the bottom of the page: It's up to you to know if the city has its fingers crossed.

Pop quiz: Using a No. 2 pencil, please check the items you believe would be official statements of the city's intentions--promises, if you will, that you as a citizen, taxpayer and voter should be able to rely on when you go to the polls:

1. PowerPoint presentation with charts, tables and graphics presented by the city manager's staff to the city council.

2. Stylish three-color brochures published by the city.

3. A campaign brochure listing former mayors and city council members as co-chairmen and myriad elected officials as members of the steering committee, with endorsements by the Chamber of Commerce, Citizens Council and other civic groups.

4. City documents bearing the city seal, under the names of the mayor, all council members and the city manager, outlining in detail what projects will be paid for with the bond money and how much will be spent on each.

Hope you didn't check anything. Because the city argued before state District Judge Ann Ashby that none of the above representations is binding in any way. All the city has to live up to is what the ballot says in the fine print on the day you go to the polls, and that language is crafted by lawyers whose intention is to make it vague, with lots and lots of wriggle room.

Judge Ashby agreed with the city. And before we light our torches, pick up our brickbats and march on her chambers, I should say that her opinion offers some compelling legal logic. After all, everybody at City Hall blabs about this and that all the time. You can't have a situation where people are walking into court saying, "The mayor promised me over dinner I was going to get my curbs fixed, and it hasn't happened yet." You do have to pick a point in the process where you agree that the city is speaking officially in a way that binds it to its word, and that point, the judge said, is the moment when the city council votes officially to approve the ballot language.

Nothing else counts.

The judge said the city did not have to honor even the official city pamphlet outlining in detail its promises to voters for what it would do with the bond money. She said, "A political subdivision cannot be bound by the representations of individual council members or the city staff."

This isn't about just peanuts. The city made changes in the deal after the election that were by no means trivial. The bonds were supposed to pay for a six-mile levee along Luna Road, at a cost of $30 million to the city. That project was simply dropped. The city was supposed to build a chain of lakes at a cost of $31.5 million. Now it's going to build one tiny lake for the whole $31.5 million and spend an additional $70 million, source unknown, for the rest of the chain.

It was going to build a scenic 50 mph parkway along the river. Now it's going to build a freeway.

The biggest change in the '98 bond campaign, however, was the money. Again and again voters were told that the city's total cost in the project would be $246 million, and that this investment would "leverage" more than a billion dollars in state and federal funds. But by the time the city was done piling on all sorts of extras like the Calatrava "signature bridges," by the time the state and federal governments were done backing out of key portions of the deal, the numbers had almost reversed. Now the possible cost of the project is in the multiple billions, and the city's share is estimated as high as $1.2 billion.

At $246 million, the thing barely passed in an extreme squeaker of an election. If anybody had breathed a word to the voters that the hit for the city might come in as high as $1.2 billion, the river project would have gone up in smoke on vote day.

I spent a bunch of time going back over the promises that were made. It was extremely depressing. In an op-ed piece in the Morning News, Mayor Ron Kirk promised, "We will invest $246 million and receive $953 million from other government agencies. That will be accomplished without a tax rate increase. The importance of an almost 4-to-1 return on our investment can't be overstated."

The Morning News hammered away at the same line in repeated editorials: The plan "would leverage nearly $1 billion more in federal and state funds if approved," the News said again and again.

None of it is true. And none of it counts. The only thing that counts is the technical language on the ballot, which only said that the city would do some things along the river.

I spoke to Dallas City Attorney Madeleine Johnson last week to ask if the Ashby ruling will be the governing principle in upcoming bond elections. She said yes.

"From a legal perspective, the opinion says it's what's on the ballot that controls."

She said the opinion gives cities a good deal of "flexibility" to change bond projects after voters have approved them. "The opinion gives us some pretty broad latitude."

Johnson said it was not her job to speak to the responsibility of council members and the mayor for seeing to it that voters get a truthful picture of a bond proposal before an election. "How individual council members may feel about that flexibility is an issue for them to discuss individually," she said.

Those of you who were around in 1998 will remember the colorful television ads before the bond election showing happy families sailing on a huge lake at the foot of downtown. That's never going to happen, and the only debate now is whether those ads were a deliberate deception or the product of the city not having any real idea what could or could not be done with the money in spite of what it was promising.

Derwoodology. Makes no difference. Members of the city council, the mayor, the staff, the Morning News, the Citizens Council, the Chamber of Commerce: They can tell you anything they want in order to get you to vote yes. Doesn't count if they have their fingers crossed.

So here's the really tough part. Derwood did this to us once already in the '98 bond election. Now it's not just a philosophy. It's reality. Derwood rules. And Derwood's back. The promises are starting already.

Oh, they're going to fix all those potholes no matter what. And the city's cost in the new center for performing arts will be a pittance, no sweat. What a steal! Derwood's word is his bond.

The voter has choices, of course. The voter of means might take his attorney with him to the polls to read the fine print on the ballot, for example. Or the cheap voter could do what I do when people talk fast about money--run. My philosophy is called once-burned-ology.